In the world of startups, it's easy to become swept up in the allure of technology. However, as I learned through my journey with Smallhold, a company I co-founded seven years ago, this can lead to serious pitfalls. Our venture, which branded itself as a technology company specializing in mushrooms, raised significant funds but ultimately failed to make the crucial decisions needed for sustainable growth. This misstep resulted in a minority investor taking over and implementing cuts that, while necessary, were poorly executed and detrimental to the innovative category we had created in grocery retail.

Nearly six months ago, I resigned from Smallhold in protest, witnessing its decline as it emerged from Chapter 11 bankruptcy, a mere shadow of its former self. The new owners, a private capital group, had made a misguided investment in our mushroom farm, primarily marketed as a tech enterprise. Although some restructuring measures were necessary, many went against the very principles we built the company on.

Together with a dedicated team of over 100 individuals—farmers, operations staff, technologists, salespeople, and marketers—we pioneered a new market for specialty mushrooms at the national retail level. Our journey began with a modest shipping container in Brooklyn, producing 100 pounds of mushrooms weekly, and grew to around 40,000 pounds per week across three cities. At its height, Smallhold generated approximately $17 million in annual revenue and achieved a valuation of around $90 million, backed by $58 million in investments. We made gourmet mushrooms a household name.

However, our growth came at a cost: we never became profitable, losing more than a dollar for every package sold.

Specialty mushrooms, including shiitake and lion's mane, had been largely ignored by U.S. grocery stores, which mostly stocked white button mushrooms produced by large companies. Smallhold launched seven new products within three years while developing a nationwide supply chain, which was exhilarating but costly.

Since my resignation on Valentine’s Day 2024, I've connected with former colleagues, vendors, and farmers who are striving to establish their own mushroom businesses. While Smallhold successfully shipped millions of pounds of organic produce that helped reduce meat consumption, its closure left a significant void in the market.

Initially, I welcomed the new investors who took control after buying out our majority shareholder. They were seen as a necessary force to push the team to make tough decisions that had been long avoided. We had a well-structured plan for reorganization, including a $500,000 budget for severance and PTO for our team. However, this plan was disregarded.

The team knew that Smallhold's trajectory was unsustainable. For months, we had been missing capacity and margin targets, and despite this, we continued to set up interviews for promotional segments as if nothing was amiss.

Eventually, the team learned about the changes not through an official announcement but rather through the sudden absence of supplies for the LA farm team. It was chaotic.

I had been advocating for new management at Smallhold for two years. Despite stepping back from my role as COO to allow for a more experienced operations leader, the company continued to chase technological returns on mushroom farm margins.

When the new owners appointed their own management team, it became clear they lacked a deep understanding of our business and values. They appointed a former fast-food executive as interim CEO and a restructuring officer as CFO, focusing on minimizing expenses and placating creditors.

The new team adopted our Chapter 11 plan but decided to eliminate the severance and PTO package. I believe this decision contradicted Smallhold's core values as a sustainable agriculture brand and damaged our integrity.

While my team and I share accountability for our failure, the new ownership's cuts were often poorly informed. We should have recognized much earlier that we were a mushroom farm, not a technology company. My cofounder and I initially pitched Smallhold as a tech-driven endeavor, confident in the potential of the specialty mushroom market, but this mindset ultimately proved detrimental.

Our rapid expansion strategy, which aimed to capture market share and educate consumers, did yield revenue but failed to generate profit margins. The complexities of our technological and infrastructural commitments hindered our ability to succeed.

As a venture capital-backed startup, the choice often lies between dominating the market or competing on price. Unfortunately, we found ourselves on the latter path, facing dire financial realities. If we had acknowledged our true nature sooner, we might have found a way to survive.

Smallhold's story, while unique, mirrors the struggles of many VC-backed startups, particularly in agriculture. The funding we relied on dried up, and our operational inefficiencies became apparent. Had we recognized that we were not a technology company, we might have saved ourselves from this predicament.

Our journey diverged from typical startup failures in one crucial aspect: our waste streams were beneficial for the environment. The byproducts of mushroom cultivation contributed to organic compost, and our team received living wages while using compostable packaging.

Through my experiences, I've learned a vital lesson: some aspects of life should not be subjected to speculative investment. Food, particularly sustainable options, deserves to be treated with respect.

While I understand the competitive nature of venture capital, it is essential to recognize that genuine innovation requires a grounded approach. My cofounder and I aimed to change the narrative around regenerative agriculture but ultimately fell short.

We failed because venture capital is inherently speculative. To navigate this landscape successfully, one must be prepared for the risks involved. We aimed for innovation but were unprepared for the consequences of rapid growth.

When the market downturn strikes, it is often the most vulnerable who suffer the most: farm workers lose their jobs, consumers face higher prices, and agriculture entrepreneurs scramble to stay afloat. The ripple effects of our failure extend far beyond our company.

As we reconsider our expectations for impact investment in agriculture, we must hold ourselves accountable. Founders should embrace a slow and steady approach to effecting change. Venture capitalists need to expand their evaluation criteria, while partners should adjust their expectations for agricultural investments.

Ultimately, if we want to make a meaningful difference through impact investing, we must redefine what we consider a successful return to include a genuine commitment to people, planet, and profit.

Reflecting on Smallhold’s bankruptcy, I believe that aligning our goals around these pillars would have led to success. Instead, we fell into the trap of competing with large agricultural enterprises, losing sight of what truly mattered.